As one corporate scandal after another broke in 2002, the drumbeat for corporate reform became louder. The scandals were front-page news in the national newspapers and the lead stories of the nightly news. The media seemed to demand reform. Even self-proclaimed opponents of nearly all new regulation, like CNN financial journalist Lou Dobbs, acknowledged that the government should step in.  Angry employees and upset investors expressed displeasure to their government representatives. People seemed to want action taken against those who were responsible for the fall in their investment portfolios.
Politicians and regulators heard the drumbeat. Indeed, politicians were especially attuned to their constituents' reaction because 2002 was an election year. In fact, the angriest people may be those citizens who had started planning their retirements. These people saw a significant decline in their retirement investments, which will have a large impact on their plans for retirement.  Also, these people are the most likely to vote! Therefore, politics and media grandstanding have been a part of the reform process. In responding to public outrage and scandal, Democrats are typically more inclined to offer government regulation and oversight as solutions to any problem. Republicans tend to offer punishment and enforcement as solutions to a problem. This can be seen from the debate of the 1990 and 1994 crime bills and the 1993 Brady Act. Corporate crime is no different. House Democratic Leader Dick Gephardt viewed the situation as an opportunity for his party to regain control of the House in the fall elections .  The Republicans recognized the potential political loss and also went on the offensive. Therefore, politicians from both parties wanted to appear tough on corporate crime. While fixing the problems in the corporate system was probably lawmakers' top priority, a secondary priority was to act quickly and maximize credibility with voters. Many politicians went on TV talk shows to express their anger at corporate executives. Each guest would demand tougher penalties and regulations than the previous guest. President Bush also spoke against the "evil doers." Even former SEC Chairman Pitt, who once said that he would change the SEC to become "kinder and gentler," tried to change his tune and enacted policies to toughen up the agency.
We recognize that our national lawmakers have a very difficult job. Consider the vast differences in recent legislative topics such as the economy, homeland security, international relations, human cloning, education, etc. Because the topics are so diverse, lawmakers can't possibly be experts in all of them. Therefore, they should take the time to thoroughly analyze the ramifications of any sweeping new legislation. A rush to enact laws to protect investors and punish white- collar crime may show constituents that lawmakers are doing something about the problem. However, rushed laws may not be the best and most effective laws. The Sarbanes-Oxley Act (discussed in greater detail later in the chapter) is an example of this. No politician wanted to be seen as opposing corporate responsibility legislation during the public outcry. Therefore, the bill sailed all the way through to a Presidential signature without serious debate on its effectiveness and ramifications .
To be most effective in fixing and enhancing the corporate system, lawmakers should first fully understand why the system is structured the way it is. Next, lawmakers must know how and where the failures took place. Then, and only then, can effective laws that punish crime and instill proper incentives be designed. This book has outlined the corporate system and its failures. The next section briefly reviews these problems.